BCBSKC Targets ‘Young Invincibles’ Ahead of Individual Mandate

Blue Cross and Blue Shield

BCBSKC Targets ‘Young Invincibles’ Ahead of Individual Mandate

Reprinted from The AIS Report on Blue Cross and Blue Shield Plans*, a hard-hitting independent monthly newsletter on business strategies, products and markets, mergers and alliances, and financing of BC/BS plans.

While most insurers have been waiting for health reform to solidify before launching new products, Blue Cross and Blue Shield of Kansas City recently designed a plan to tap the “young invincibles” market — a move executives hope will pay off with the individual mandate included in the law. Yet one broker says the plan’s underwriting is so tight that none of her clients have been approved, and that this, along with several other aspects of the plan, will need changing before certain health reform initiatives go into effect in 2014. As she sees it, insurers are now in a race to get individuals on the books and keep them before the mandate starts.

Ron Rowe, director of small group marketing for BCBSKC, says that 65% of uninsured people are within the 19- to 39-year-old age band, so the insurer saw a need to become competitive in that market. A year ago, when the high-deductible product was in its nascent stages, he says, “We had two things we were trying to accomplish. If health reform goes through and [young, healthy people] are forced to buy, what type of product do they want to buy? And if it doesn’t go through, what type of product can we succeed in convincing them to buy even though it’s not mandated? We knew price [was a factor], but if everyone has the same price, what are the best benefits?”

Based on market research, the Kansas City Blues plan added five office visits with a copayment (to give members first-dollar coverage before the $2,500 deductible kicks in), an eye exam with a copay, access to brand-name drugs after a $500 deductible and the option of a two-year rate guarantee.

Torre Nigro, senior vice president of small group and direct pay marketing for BCBSKC, emphasizes that the two-year guarantee is unique. “No one is doing that in the individual market. Almost 60% of people coming in are buying the rate guarantee. It’s a higher rate initially but you hold the rate for two years.”

BCBSKC began a hip, tech-savvy campaign for Blue4U on March 1. Potential subscribers can get quotes through text messages and apply on an iPhone without ever speaking to a sales representative Rowe says the plan has been generating about 500 quotes a week through texting. The marketing copy is colloquial and even trendy, with one brochure stating, “Blue4U has your back.” Rowe points out, “This audience doesn’t relate to heart disease or cancer, but can relate to blowing out a knee on the basketball court.

The Kansas City Blues plan introduced a similar plan, AffordaBlue, which Rowe says now makes up 35% of sales, two years ago. AffordaBlue differs from the new plan in that it offers a larger hospital network and only generic drugs.

According to broker Marnie Clawson of Leawood, Kan.-based Clawson Benefit Concepts, “the individual mandate doesn’t come into effect until Jan. 1, 2014, so [BCBSKC is] trying to get some of the market before everyone is going for it.”

She says Humana Inc. has a similar plan that allows people to subscribe by iPhone as well. “This is just the beginning” of the new media sales pitches, she says. “We’ll see a sea change in how health insurance is marketed.”

Plan Seeks ‘Super Healthy’ Members

The combination of easy access and low premiums are meant to draw in subscribers who would otherwise go without insurance. The Blue4U online instant quote system offers a 25-year-old male in the Kansas City area a price of $40.66 per month. The premiums are driven down in part by the plan’s paper-free system, says Rowe. Applications and billing are all done online, without the option of switching to paper, the executives note.

The Kansas City Blues plan is “No. 1 with individual coverage in this market,” says Clawson. “They do a good job.” But the company’s underwriting on its individual plans “since the beginning of this year has tightened up dramatically.…[The insurer is] demanding a lot more in the way of medical records,” she says.

Of her clients who applied for Blue4U, everyone “who had anything wrong with them was declined — anything at all,” Clawson says. “They only want under-30, super healthy and nonsmoking.”

When asked about the underwriting, Rowe says it is more restrictive than for AffordaBlue, but in line with the company’s other products. Of the 300 applications that have come in, 80% have been approved for either Blue4U or AffordaBlue, he says.

Yet the plan will need some alterations three years from now. Along with the individual mandate, the guaranteed-issue requirement will go into effect and the rating band will be limited to a 3-to-1 ratio in 2014. That means the rating slope will flatten out, which will make the prices for young people higher, Clawson says. “I think all carriers are in a race to get bodies insured on the books,” she states.

Nigro says the company will make some changes to the product, including ending exclusions based on pre-existing conditions. “This product will line up well when put in the exchange,” he says. The executives did not offer more specifics on what kinds of changes the benefit design will undergo in 2014.

Even with the individual mandate looming, Rowe says, right now insurers “still have the challenge to convince a 25-year-old male that he needs to buy insurance instead of getting a new game for the Xbox 360 every Friday.”